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"I had been genuinely
enjoying the run up of gold, silver and my mining stocks the
last while. I kept wondering when the correction would occur
and now that it has I would like to again share my views.
These markets advance and correct
when they are oversold or overbought. I read all kinds of technical
analysts whose charts tell me at what points each is to occur.
In fact this correction in precious metals has been long overdue
given the length and size of the recent gains. There were all
kinds of folks recommending that we take some gains off the table
for the last month coupled with a large number of folks strongly
recommending that investors wait for the inevitable pull back
to buy. The large gains before the current correction started
to make this advice look suspect, but reality always prevails.
Since I am for the most part a buy and hold investor, not a trader
I didn't take that advice because I can't be bothered to manage
my portfolio that closely and I am invariably going to be a bad
market timer.
So, the current correction
in precious metals and energy stocks comes as no surprise to
me. As long as the secular bull market in commodities - especially
hard commodities such as precious and base metals and energy
remain intact - there is nothing to worry about. This reality
is confirmed when there are always higher highs and higher lows.
In other words, two steps forward and one step back. I fully
expect that to continue for the next several years and will culminate
in some rather parabolic rises and then almost a straight spiral
southward followed by the dead cat bounce rebound to half its
prior high followed by a rapid decline and long term slump.
Think about it. The $850 mid
day gold bullion high of 1980 translates into $2,175 current
dollars. We therefore have just begun and have a long way to
go to match that blow off level. As you know, I look primarily
at fundamentals in my analysis and for my conclusions and I have
total certainty that the mess looming in the US and global economies
will drive precious metals northward in a huge way. Sure there
will be corrections with some being significant but they will
be invariably brief, although some might be a little steep. This
is one bull I intend to ride the distance but taking some money
off the table periodically. I'm even convinced that my earlier
expectations about my precious metals assets doubling are far
too modest. Patience is what I tell myself. We've just begun!
As for my portfolio, I have
mainly precious metals stocks, both large and small, in mutual
funds as well as a few individual junior 3 - 4 year term warrants.
I also have some energy stocks in oil, gas and a uranium warrant.
Overall, at the present level of value in the current correction,
I have lost some of my incredible paper gains which had grown
substantially over my original investments. But I am not worried.
We will probably see some choppy sideways action in prices over
the next few months and then some serious and quick moves northward
again. Over the longer term, perhaps the next four or five years,
I see some serious gains in the metals and energy areas because
of supply issues, demand growth and geopolitical uncertainties
especially in base metals and energy.
In terms of precious metals,
it will be driven by concerns about inflation, the value of paper
money and crises brought on by highly leveraged hedge fund investments
gone bad. Trade deficits and imbalances coupled with excessive
creation of new money vis a vis GDP growth, as well as budgetary
deficits, will all impact gold prices.
Higher interest rates designed
to continue to cause foreigners to buy US debt will definitely
bring about a recession, unemployment, repossessions of assets
like houses and cars from highly indebted consumers. I am one
who believes that it won't be a soft landing in part because
we are at the stage of permanently high energy prices which will
fundamentally change the economies of the developed world and
bring about a permanent lowering of the living standard for the
average person.
To conclude, I don't worry
about the current correction because the commodities bull remains
intact and will for the next several years. I feel safer being
invested in that area than any other segment of the financial
world.
So am I a 'crazy man' or just
crazy like a fox?"
-contributed by a Precious
Metals Warrants' subscriber
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